AbbVie's Not as Vulnerable as the Street Believes
NEW YORK ( TheStreet) -- It has now been three full quarters since health care conglomerate Abbott labs
Now, although the spinoff, which was originally announced in late 2011, was a long-anticipated move, the Street seems surprised that AbbVie has performed so well on its own. Truth be told, I am surprised, too. And with AbbVie's valuation having surpassed large-cap rivals, like Pfizer
First, I will grant that it's within the Street's right to compare AbbVie's third-quarter results to the company's July and April quarters. I will also admit that unlike its previous reports, AbbVie's revenue and margin growth weren't as compelling. What I did notice was that AbbVie is still delivering on key initiatives as promised by management upon the Abbott separation.
Revenue advanced 3.3% to $4.66 billion, which easily beat estimates of $4.52 billion. As has been the case for some time, rheumatoid arthritis drug Humira, which posted worldwide growth of close to 20%, did all of the heavy lifting. I won't debate the fact that AbbVie relies on Humira quite a bit, which has raised some concerns. That's also the case for many Big Pharma rivals that have produced flagship products.
Take, for instance, Johnson & Johnson
In the case of AbbVie, what's interesting is that over the past couple of quarters, I've heard nothing but complaints from analysts about Humira's long-term performance. The concern continues to be that rival products -- Xeljanz from Pfizer and Apremilast from Celgene
Given that Humira recently generated third-quarter revenue of $2.77 billion, which is roughly 60% of AbbVie's global sales, the Street must explain how this could have happened. If not, we must appreciate that Humira's growth is as "healthy" as ever. The good news here is that Humira's strength was able to offset AbbVie's weak performing drugs, like Trilipix and TriCor, which suffered due to patent expirations.
From an operational perspective, with gross margins coming in 79.7%, which is almost 10% higher than both Merck